Goldman Announces 2 Trading Loss Days In Q3, Settles Research Lawsuit, "Rainy Day" Fund At Record $173 Billion

It is now official that Bank of America has a 'better' trading desk than Goldman (no matter that it is outsourced to Calcutta). GS has just released its 10-Q, in which it discloses that even though it had 7 days in the quarter in which it made over $100 million, it actually lost money on 2 days out of a total of 66. This compares to BofA's flawless Q3. Additionally, in Q2, while Goldman has far more trading losses, it also made big money (>100) on more than double as many days. The trend here is unmistakable: the open ended >$100MM trading days for Goldman are plunging: from 35 to 17 to 7. And this is a trend which now that Goldman prop's activity is far more limited, will persist.

Also interesting to note in the 10-Q is the following legal settelement:

Research Independence Matters.  In the lawsuit alleging that Group Inc. and GS&Co. violated the federal securities laws in connection with the firm’s research activities, the parties entered into a definitive settlement agreement on July 12, 2010 pursuant to which the settlement will be funded by the firm’s insurers. In the class action relating to research coverage of RSL Communications, Inc., the parties entered into a definitive settlement agreement on August 23, 2010. Both settlements have received preliminary court approval, but remain subject to final court approval.

This also is not the last settlement to come out of Goldman's sell side research desk.

Lastly, with regard to Goldman's rainy day fund, the firm's "Global Core Excess", rose to a whopping 173 billion, up $10 billion from $162.5 billion in the prior quarter, and from $166 at the end of last year.

The firm added to its holdings of USTs even as it sold of European debt to get to this number.

		Three Months				Year Ended
		Ended September				December
		2010				2009
		(in millions)
Overnight cash deposits		$	27,040			$	21,341
Federal funds sold			—				374
U.S. government obligations			114,561				85,702
U.S. agency obligations and highly liquid U.S. agency mortgage-backed obligations			2,159				15,108
French, German, United Kingdom and Japanese government obligations			29,266				43,849
Total		$	173,026			$	166,374

Following is the firm's description of Global Core Excess:

Our most important liquidity policy is to pre-fund  what we estimate will be our potential cash needs during a liquidity crisis and hold such excess liquidity in the form of unencumbered, highly liquid securities that may be pledged or sold to provide same-day  liquidity. This “Global Core Excess” is intended to allow us to meet immediate obligations without needing to sell other assets or depend on additional funding from credit-sensitive  markets. We believe that this pool of excess liquidity provides us with a resilient source of funds and gives us significant flexibility in managing through a difficult funding environment. Our Global Core Excess reflects the following principles:

• The first days or weeks of a liquidity crisis are the most critical to a company’s survival.

• Focus must be maintained on all potential cash and collateral outflows, not just disruptions to financing flows. Our businesses are diverse, and our cash needs are driven by many factors, including market movements, collateral requirements and client commitments, all of which can change dramatically in a difficult funding environment.
• During a liquidity crisis, credit-sensitive funding, including unsecured debt and some types of secured financing agreements, may be unavailable, and the terms or availability of other types of secured financing may change.
• As a result of our policy to pre-fund liquidity that we estimate may be needed in a crisis, we hold more unencumbered securities and have larger debt balances than our businesses would otherwise require. We believe that our liquidity is stronger with greater balances of highly liquid unencumbered securities, even though it increases our total assets, and our funding costs.

The size of our Global Core Excess is based on an internal liquidity model together with a qualitative assessment of the condition of the financial markets and of Goldman Sachs. Our liquidity model, through which we analyze the consolidated firm as well as our major broker-dealer  and bank depository institution subsidiaries, identifies and estimates potential contractual and contingent cash and collateral outflows over a short-term  horizon in a liquidity crisis, including, but not limited to:

• upcoming maturities of unsecured long-term debt, promissory notes, commercial paper, term deposits and other unsecured funding products;
• potential buybacks of a portion of our outstanding unsecured funding;
• potential withdrawals of client deposits in our banking entities;
• adverse changes in the terms of, or the inability to refinance, secured funding trades with upcoming maturities, reflecting, among other factors, the quality of the underlying collateral and counterparty concentration;
• outflows of cash or collateral associated with the impact of market moves on our OTC derivatives, listed derivatives and securities and loans pledged as collateral for financing transactions;
• other outflows of cash or collateral related to derivatives, including the impact of trade terminations, collateral substitutions, collateral disputes, collateral calls or termination payments (in the event of a two-notch downgrade in our credit ratings), collateral that has not been called by counterparties but is available to them, or additional margin that could be requested by exchanges or clearing houses in a stressed environment;
• potential liquidity outflows associated with our prime brokerage business, including those related to customer credit balances;
• other upcoming cash outflows, such as tax and other large payments.
• draws on our unfunded commitments not supported by William Street
  Funding Corporation (1), with draw assumptions varying in magnitude
  reflecting, among other things, the type of commitment and counterparty;
  and

Comments

[emsolý]

...and the stats are even worse when you think about the $100mm in real terms (adjusted/normalized by gold price)

[DormRoom]

Didn't a Russian steal it's algo during the summer?

Perhaps, the algo is being opensourced.

[MeTarzanUjane]

The only thing that this shows me is that the Gold-man accountants are shifting profitability onto the books of subsidiaries so the greatest swindle of all times is no longer visable to the naked eye.

Nice PR job.

[Problem Is]

+1

[centerline]

Talk about balls.  You'd think the TBTF would at least throw a couple of days here and there slightly into the red.  Rather, it is out in the open, near impossible to achieve performance and only says loud and clear that the game is rigged.  Not that we here don't already know that - but there is clear risk of spooking the sheeple here (wishful thinking I suppose).  Maybe developing some sort of Stockholm Syndrome would be nicer than watching this daylight banker free-for-all continue day after day, week after week, etc.  Someone put me back in the Matrix now please.

[NumberNone]

No SEC, no FBI, no AG's, no nothing...no one cares, no one monitors, no one takes action against.  Until someone can show how this impossibility is kicking old ladies out of their homes or starving children it will continue.  

[Cognitive Dissonance]

I have faith that my favorite squid will get back in the saddle and re-start it's extremely profitable rape and pillage ways. You just can't keep greed, lust and corruption under wraps for too long when the rest of the Street is making a killing.

To those on the Street, there's nothing worse than making less than the guy next door. Nothing.

[Eally Ucked]

I can brag about my gains in trading, I forgot what happened in last few years. I have gains on my portfolio of dogs of about 30%, I'm so happy about that that I don't remember any more that I've lost few h...  th....$ before. Now I'm bent on killing dogs as fast as possible, I leave skins to those big guys to make ball bags like some Amazon tribes and make additional profit on it. Be careful with your balls! Where is mr.Dover III with his funny pieces?   

[DB Cooper]

You have the Gambino Family and the Blankfein Family and they both make money every day.

[Problem Is]

LOL.

"To those on the Street, there's nothing worse than making less than the guy next door."

Trader: "Oh no... my dick really is smaller..."

[scratch_and_sniff]

How can you lose money with infinite money and leverage, surely someone has lost their bottle in GS.

[Hubbs]

For all you gamblers out there, please clarify this based on traditional money losing vs winning days for these firms. What are the statistical probabilities that this could happen by chance or based on traditional returns?

[scratch_and_sniff]

Probabilities go out the window when you have that kind of clout. Its like asking what is the probability of the market not making an intraday/intra minute correction, i.e fall from start to finish with no upticks. All these firms do is keep on building positions untill they are in the money, which also means when they lose they lose big, but not big enough to offset the profits!